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Distribution channels

Why to deal with this? A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. A distribution channel can include wholesalers, retailers, distributors and even the internet.

"Direct" channels allow the consumer to buy the good from the manufacturer (e.g. through an e-shop, a catalogue or a sales team of a company), whereas "indirect" channels can include wholesalers, retailers, agents/representatives, etc.


Activities involved in the distribution channel are wide and varied though the basic activities revolve around these general tasks:

  • Ordering
  • Handling and shipping
  • Storage
  • Display
  • Promotion
  • Selling
  • Information feedback
When is it suitable/applicable? In order to facilitate an effective and efficient distribution system many decisions must be made including (but certainly not limited to):
  • Assessing the best distribution channels for getting products to customers
  • Determining whether a reseller network is needed to assist in the distribution process
  • Arranging a reliable ordering system that allows customers to place orders
  • Creating a delivery system for transporting the product to the customer
  • For tangible and digital goods, establishing facilities for product storage
When is it NOT suitable/applicable? While on the surface it may seem to make sense for a company to operate its own distribution channel (i.e., handling all aspects of distribution) there are many factors preventing companies from doing so. While companies can do without the assistance of certain channel members, for many marketers some level of channel partnership is needed. For example, marketers who are successful without utilizing resellers to sell their product (e.g., Dell Computers sells mostly through the Internet and not in retail stores) may still need assistance with certain parts of the distribution process (e.g., Dell uses parcel post shippers such as FedEx and UPS). In Dell’s case creating their own transportation system makes little sense given how large such a system would need to be in order to service Dell’s customer base. Thus, by using shipping companies Dell is taking advantage of the benefits these services offer to Dell and to Dell’s customers.warning.png"While on the surface it may seem to make sense for a company to operate its own distribution channel (i.e., handling all aspects of distribution) there are many factors preventing companies from doing so. While companies can do without the assistance of certain channel members, for many marketers some level of channel partnership is needed. For example, marketers who are successful without utilizing resellers to sell their product (e.g., Dell Computers sells mostly through the Internet and not in retail stores) may still need assistance with certain parts of the distribution process (e.g., Dell uses parcel post shippers such as FedEx and UPS). In Dell’s case creating their own transportation system makes little sense given how large such a system would need to be in order to service Dell’s customer base. Thus, by using shipping companies Dell is taking advantage of the benefits these services offer to Dell and to Dell’s customers." cannot be used as a page name in this wiki.
What costs are related to it (financial, time effort etc.)? The marketer must take into consideration many factors when choosing the right level of distribution coverage. However, all marketers should understand that distribution creates costs to the organization. Some of these expenses can be passed along to customers (e.g., shipping costs) but others cannot (e.g., need for additional salespeople to handle more distributors). Thus, the process for determining the right level of distribution coverage often comes down to an analysis of the benefits (e.g., more sales) versus the cost associated with gain the benefits.

What’s the relevant HTE output? HTE is not focused on marketing support and distribution channels.
Whom can I talk to from the HTE team? Most partners will be able to signpost you to an organisation competent in marketings issues.

Relevant internet links Detailed and professional information:
Online databases and tools Online tool/Template:
Where to get advice, consultancy? Support:
  • Marketing/sales, logistics/transport consultants
  • Public institutions like chamber of commerce etc.
  • Enterrprise Europe Network for finding distribution partners in other European countries
Related innovation sheets Communication strategy, Social media marketing, Target group, Management x launching, Financial x launching

Title Distribution channels
Aspect
Latest Version 16.07.2012
Completed by ZENIT


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Created by Hte zenit on 16 July 2012, at 12:51